HELOC and home equity loan rates Monday, January 5, 2026: Both options feature lower rates

Core Insights - Current national average rates for home equity lines of credit (HELOC) and home equity loans (HEL) are in the mid-7% range, making them more affordable than three years ago [1] - The average HELOC rate is 7.44% and the average home equity loan rate is 7.59%, based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio of less than 70% [2] - Homeowners with low primary mortgage rates and significant home equity may find it advantageous to obtain a HELOC or HEL for cash needs without sacrificing their favorable mortgage rates [12] Interest Rate Dynamics - HELOC interest rates differ from primary mortgage rates, typically based on an index rate plus a margin, with the current prime rate at 6.75% [5] - Lenders have flexibility in pricing second mortgage products, and rates can vary significantly based on credit score and debt levels [6] - Average national HELOC rates can include introductory rates that may only last for a limited time before becoming adjustable [6] Loan Options and Features - A HELOC allows homeowners to draw from an approved line of credit as needed, while a home equity loan provides a lump sum [3] - The best HELOC lenders offer low fees, fixed-rate options, and generous credit lines, with some promotional rates available [8] - Home equity loans typically have fixed rates for the duration of the repayment period, making them easier to compare [9] Market Context - The Federal Reserve estimates that homeowners have $36 trillion in equity locked in their homes, indicating a significant opportunity for second mortgages [4] - The current average rates for HELOC and HEL serve as benchmarks for homeowners when shopping for second mortgage lenders [11] - Homeowners can utilize cash drawn from their equity for various purposes, including home improvements and repairs, making this a potentially favorable time for obtaining these loans [12]